Jon Taplin's Blog

Rotten Eggs

You all know I have a remarkable tolerance for libertarians, but here is where I really break from their “fire all the regulators” schema. Jack DeCoster, owner of Wright County Egg, which recalled millions of eggs poisoned with Salmonella in the last few weeks is a serial violator of even the egg Councils own rules. As the Wall Street Journal reports when the FDA finally got into this case and inspected DeCoster’s egg factories, this is what they found.

The FDA inspectors who visited Wright County Egg, one of the producers at the heart of the salmonella-related egg recall, reported finding  wild birds, rodents, dead and live flies, maggots and chicken manure piled up to eight feet high in or near the producer’s facilities.

There are just too many bad actors out there like DeCoster. Continue reading ‘Rotten Eggs’

Morbid Symptoms

“The old is dying and the new cannot be born.  In this interregnum there arises a great diversity of morbid symptoms.”-Gramsci

The etymology of the word “morbid” is the Latin word morbidus meaning disease. Let us consider the particular disease that grips America right now. Students of Germany in the early part of the Great Depression (1929-1934) might recognize the conditions for a Fascist democratic coup that took place in that period. Here are some of the symptoms:

Paranoia-The Wall Street Journal reports that if you had been savvy enough to invest in an Armageddon portfolio this year you would be sitting pretty.

It is the ultimate bunker portfolio.

Amid the market tumult, a handful of stocks have seen their share prices ratchet up to record highs in recent weeks. And many of them are connected by a curious, if disconcerting, thread: Between them, they provide an investor with essentials for any respectable fallout shelter—makers of bottled water, canned goods, dehydrated broth, gas masks and auxiliary generators.

As with the Goldline Scams, Beck and the end of the world brigade that are pushing the notion, that Spam is the protein source of the future, is part of a completely dystopian fantasy that I think bears little touch with reality but feeds the all important “fear quotient” that is so necessary to fascist politics. A strong man is needed in a time of chaos. Continue reading ‘Morbid Symptoms’

Golden Age of TV Drama

I was at lunch with Norman Lear a few months ago when someone at the table was bemoaning the sorry state of a TV business dominated by reality fare like The Real Housewives of New Jersey. Norman turned and said, “that may be true but as far as I’m concerned we are in the golden age of TV drama.”

Whoever wins the Emmy tonight for the Best Dramatic Series, I have come to realize that Lear is right. My own personal favorite, Mad Men, is a perfect example of why the quality of writing and character development in contemporary TV drama surpasses that of the cinema. The most popular dramatic movies this year are Avatar, Inception, Iron Man 2, The Twilight Saga; Eclipse, Clash of the Titans. Not one of them can compare in the quality of dialogue, character or plot twist with an single episode of Mad Men. Of course you say that is an unfair comparison as all the top action movies are not about character or dialogue–they are about action and special effects. So let’s go further down the list to Shutter Island or Eat, Pray, Love. I still say no contest.

The problem with Hollywood is that they are deathly afraid of characters deemed “unsympathetic” and so they will never try the crazy high wire act that Mad Men’s Matthew Weiner is constantly working with Don Draper. Draper cheats on his wife, drinks in the middle of the day and is often rude to his subordinates. And yet you stick with him, deeply interested in his journey. In the current season, Draper is headed for a real fall, at which point we assume he will pull himself together and regain our trust. But you can’t be sure and that is why we are in the golden age of TV drama.

Glenn Beck Morphs into Billy Graham

I watched the whole Glenn Beck speech waiting for the red-meat politics to flow, but it never came. Instead what he delivered felt like the world’s largest AA meeting. Beck confessed his sins and asked us all to surrender to God and “Divine Providence.” He promised to listen with an open heart to his political opponents.

Either he had some Paul on the road to Damascus conversion in the last few weeks or this was a Glenn Beck impersonator at the Lincoln Memorial.

Weird.

Innovation & Boomer Retirement

The clearest sign of a society’s priorities is where it chooses to spend its resources. Jeremy Grantham, the super-prescient Boston investor had a few things to say about this recently and I thought it worthwhile to quote him at length.

My previous argument in the Economist debate was that the 3% of GDP that was made up of financial services in 1965 was clearly sufficient to the task, the proof being that the decade was a strong candidate for the greatest economic decade of the 20th century. We should be suspicious, therefore, of the benefits derived from the extra 4.5% of the pie that went to pay for financial services by 2007, as the financial services share of GDP expanded to a remarkable 7.5%. This extra 4.5% would seem to be without material value except to the recipients. Yet it is a form of tax on the remaining real economy and should reduce by 4.5% a year its ability to save and invest, both of which did slow down.

With a U.S. GDP of $14.3 Trillion, Grantham is saying we spent in excess of $643 Billion a year on the financial sector that could have gone to more productive uses. Much of that went to pay bankers and hedge fund commissions and bonuses. Continue reading ‘Innovation & Boomer Retirement’

Rightsizing the Pentagon

I’m going to show you three charts that are part of a much larger presentation prepared by the Defense Business Board, an advisory council to the Secretary of Defense that was created in 2001. It is not classified and was sent to me by one of our readers who is as concerned as I am that Eisenhower’s warning of the “undue influence of the Military Industrial Complex” threaten the very security of our nation.

The first is the comparative budgets of the Pentagon since the Carter Presidency.

What is so immediately striking is that the military budget has grown 289% in real dollars since 1980 and yet the actual fighting force has shrunk radically: Army divisions down by 47%, commissioned ships down by 45%, Air Force fighter attack jets down by 54%. Continue reading ‘Rightsizing the Pentagon’

Alienation

A former student forwarded this to me yesterday. It’s a speech given in 1972 by Jimmy Reid, the leader of the English Shipbuilder’s Union, who died last week. If you had to find a root cause for our current malaise, it might be the one that Jimmy Reid describes—Alienation.

Alienation is the precise and correctly applied word for describing the major social problem in Britain today. People feel alienated by society. In some intellectual circles it is treated almost as a new phenomenon. It has, however, been with us for years. What I believe is true is that today it is more widespread, more pervasive than ever before. Let me right at the outset define what I mean by alienation. It is the cry of men who feel themselves the victims of blind economic forces beyond their control. It’s the frustration of ordinary people excluded from the processes of decision-making. The feeling of despair and hopelessness that pervades people who feel with justification that they have no real say in shaping or determining their own destinies. Continue reading ‘Alienation’

Two Americas

I have been accused of aggregating data when it comes to my economic analysis of America’s crisis.

I plead guilty.

If you were to look at the chart above of personal consumption, you would certainly think we were still in a deep recession, if not the second great depression. And yet over the weekend in two separate dinners, the restaurants on the West side of Los Angeles were packed. The conversation seemed ebullient. The wine was flowing.

So we are living in parallel universes. One world as described by Gretchen Morgenson are in Debt’s Deadly Grip.

Halfway through this year, 11.4 percent of outstanding consumer debt was delinquent, up slightly from 11.2 percent a year earlier. An astonishing $1.3 trillion of consumer debt is delinquent, with $986 billion seriously so — 90 days late and counting. While delinquent balances are down by about 3 percent from the same period last year, serious delinquencies are up a bit more — 3.1 percent.

Here are some other troubling statistics from the Fed: a half-million people had a foreclosure added to their credit reports between March 31 and June 30, an increase of 8.7 percent over the first quarter of the year. And the numbers of consumers with new bankruptcies appearing on their credit reports rose 34 percent during the quarter, to 621,000. That increase is significantly bigger than it has been in the last few years, according to the Fed.

These sobering facts directly lead to the aggregated data in the chart at the top. No one with maxed out credit cards and an underwater home equity loan is spending time at the mall. Continue reading ‘Two Americas’

The End of U.S. Cultural Imperialism

I often teach graduate student who are in our Global Masters Program, which means they have spent a year at the London School of Economics before coming to USC. In general they leave London convinced that U.S. Cultural Imperialism is a reality. The notion is that Hollywood or the U.S. music business overwhelms local cultural product and it often bleeds into McLuhan’s prediction that we would all become part of a “global village”, ostensibly listening to the same tunes. I’ve said this was nonsense and now some economists have come forward with fairly compelling proof on my side of the argument.

First, they prove that adjusted for GDP, Sweden and Great Britain are greater pop music exporters.

Waldfogel and Ferreira analyzed every song on the hit lists of 22 countries between 1960 and 2007. They then compared each country’s share of the pop-music market with the size of its economy.

Not surprisingly, American hits dominated, accounting for 51 percent of music sold over the period. Adjusted for GDP, however, Sweden takes the top spot — followed closely by Britain. Despite fears of pernicious cultural Americanization, more people around the world are listening locally: Foreign artists now account for just 30 percent of each country’s pop hits, down from about 50 percent in the 1980s.

But more importantly, they show that people like to consume music from their own country.

Trade in music bears some similarities to the trade of physical goods: shorter distances and sharing a common language promote higher trade volumes between countries, and those relationships have been relatively stable over the last 50 years. We also find a large bias toward domestic consumption of music which has, perhaps surprisingly, increased in the past two decades: the share of consumption worldwide that originates from domestic artists increased from less than 50% during the 1980’s to almost 70% in 2007.

McLuhan was totally wrong. We have not become a global village. Maybe a global megacity, with hundreds of different neighborhoods we could visit in a single day, each with their own distinctive sound blaring from the boom box.

Cool

From Jesse Dylan